THE ROLE OF AN ESTATE TRUSTEE DURING LITIGATION IN ATLANTIC CANADA Timothy C. Matthews, QC, TEP Stewart McKelvey Legislation in the four Atlantic Provinces closely follows the example of the English Judicature Act, 1925, s. 163(1), which set out the jurisdiction of the courts to appoint an administrator pendente lite in contentious circumstances: (i) questions regarding the validity of the will; or (ii) issues related to obtaining, recalling or revoking any grant. The administrator so appointed had all the rights and powers of a general administrator, other than the right of distributing the residue of the estate. The administrator was subject to the immediate control of the court and acted under its direction. S. 163(2) empowered the courts to award the administrator such reasonable remuneration as the court thinks fit. New Brunswick Probate Court Act, SNB 1982, c P-17.1 52. Pending an action or other proceeding concerning the validity of the will of a deceased person or for obtaining, recalling or revoking any grant of letters probate of a will or letters of administration, the Court may appoint an administrator of the property of the deceased person, and the administrator so appointed has all the rights and powers of an administrator, other than the right of distributing the residue of the property, and every such administrator is subject to the immediate control and direction of the Court, and the Court may direct that such administrator receive out of the property of the deceased such reasonable remuneration as the Court considers proper. Newfoundland and Labrador Judicature Act, RSNL 1990, c J-4 121. (1) The court may appoint an administrator of the estate of a deceased person pending a proceeding concerning the validity of the deceased's will, or for obtaining, recalling or revoking letters of probate or administration. (2) An administrator appointed under subsection (1) has all the rights and powers of an administrator appointed in the usual manner except the right to distribute the residue of the estate. (3) An administrator appointed under subsection (1) is subject to the control of the court and shall act under its direction. Prince Edward Island Probate Act, RSPEI 1988, c P-21 39. (5) Pending any suit touching the validity of the will of any deceased person, or for obtaining, recalling or revoking any probate, or any grant of administration, the court may appoint an administrator of the property of the deceased person, and the administrator so appointed has all the rights and powers of a general administrator, other than the right of distributing the residue of the property and every such administrator is subject to the immediate control of the court and shall act under its direction and for his service may be paid such reasonable remuneration
2 out of the estate as the court may allow. Nova Scotia Probate Act, RSNS 2000, c. 31. Administration pending litigation 24 The court may appoint any person who is, under Section 32, entitled to a grant as the personal representative of the deceased person pending any litigation respecting the validity of a will of a deceased person or for obtaining, recalling or revoking any grant. Effect of appointment 27 (1) An administrator appointed pursuant to Section 21, 22, 23, 24 or 25 has all the rights and powers of a general administrator and is subject to the immediate control and direction of the probate court and shall act under its direction. (2) Notwithstanding subsection (1), an administrator appointed pursuant to Section 24 may not distribute the residue of the property being administered. (3) The court may impose on a grant made pursuant to Section 21, 22, 23, 24 or 25 any limitations and restrictions it thinks fit. General Discussion of the Powers and Duties of an Administrator Pendente Lite There is a dearth of reported cases in the Atlantic Provinces interpreting the statutory framework. One suspects that many of these issues are resolved by agreement or addressed by court orders that are not accompanied by written decisions. The historic English practice is instructive and likely persuasive. I am indebted to the discussion in Williams on Executors and Administrators which cites older English decisions. Some general principles can be discerned. (a) Choice of Administrator The administrator pendente lite is an appointee of the court he, she or it is not an agent or nominee of any party proposing the appointment. This reflects the status of such an administrator under the immediate control and direction of the court. There are similarities to a court-appointed receiver in other contexts. The court may determine that the named executor is suitable if that person s appointment is not questioned and he, she or it can discharge the duties of such an administrator fairly: Mortimer v. Paull, L.R. 2 P. & D. 85; In the estate of Day, [1940] All E.R. 544. It is usual to appoint a person who is presumed to be indifferent between the contesting parties: Northy v. Cook, 1 Add. 330; Young v. Brown, 1 Hagg. Ecc. 54; Stratton v. Ford, 2 Lee 49. (b) Powers of Administrator While the statutes clearly state that the administrator pendente lite may not distribute the residue, it is probable that there is some flexibility (if authorized by the court) to make specific distributions. In a mid 20 th century case, the court authorized expenditures necessary for the
3 preservation of the property of the deceased and approved distributions for the maintenance and education of an infant beneficiary: In the estate of Miesequaes, [1950] W.N. 232. Williams is definite that the appointment provides for administration of both the real and personal estate of the deceased, unless the judge otherwise directs. This would seem to follow obviously from the assertion that the administrator pendente lite has all the rights and powers of a general administrator or executor. In Valin v. Jackson, 1995 CanLII 3900 (NB QB), the court upheld the power of administrator pendente lite to make a valid conveyance of real estate. That said, it would be imprudent for any administrator to deal with real estate that was the subject of a specific gift in the will, unless its sale was absolutely necessary for the due administration of the estate and such sale was either consented to by the beneficiary or ordered by the court. In Scott Estate v. Scott, 1997 CanLII 9491 (NB QB), in the order appointing the administrator, restrictions were imposed on payment of debts while the litigation was proceeding, as some of these debts were disputed. Ordinarily, the administrator would pay the usual debts and taxes of the deceased as they come due, even while litigation is pending or underway. (c) Duration of the Appointment The authority of the administrator pendente lite commences on the effective date of the order appointing him, her or it to act. English authority suggests that the powers of the administrator cease when the will is upheld (whether or not the will appoints executors) and do not continue until a new grant is made. Wieland v. Bird, [1894] P. 262. To remove ambiguity it may be desirable for the appointment order to address this issue. There may be urgent issues that need to be addressed after the date the dispute is resolved and prior to the date a grant is made. If a previous grant of probate or administration had been made, then interrupted by the grant pendente lite, arguably the prior grant is revived when the will is upheld. (d) Duties and Remuneration Williams states that, based on the practice of the English courts, an administrator pendente lite is required to prepare an inventory of the estate assets and final accounts upon discharge, to be filed with the court. The New Brunswick and Prince Edward Island statutes are explicit that the administrator pendente lite is entitled to receive reasonable remuneration. Although the statutes in Nova Scotia and Newfoundland and Labrador are silent, general principles and the court s inherent jurisdiction to award compensation for services rendered to the estate would support reasonable remuneration. The likely opportunity to claim compensation would be the presentation of final accounts to the beneficiaries and to the court. If the residuary beneficiaries are adult and competent, they could simply approve the payment of compensation out of the estate. They could also approve the administrator s accounts or authorize the executor or general administrator to approve them, without requiring a further appearance in court. An interesting question arises when one takes into consideration the 5 % upper limit imposed on executor and administrator compensation by statute or practice. Can this be exceeded if an
4 administrator pendente lite has been appointed? Alternatively, is the executor s commission reduced to make room for payment of the administrator? I have no definitive answer. Role of the Personal Representative: Strict Neutrality or Party to the Proceeding? The most comfortable role for the executor named in a will or codicil or an administrator pendente lite is neutrality. If one has the good fortune to have beneficiaries seeking to propound a document as testamentary (as well as those contesting it), the prudent course of action is to remain above or outside the fray. This will avoid unnecessary legal expenses being incurred by the personal representative as well as avoiding the risk of an adverse award of costs. Early English authority supports the position that an interested person may compel the executor or any other person seeking to propound a testamentary document to do so in an action (proof in solemn form). Belbin v. Skeates, (1858), 1 Sw. & Tr. 148. In a recent Nova Scotia decision, Casavechia v. Noseworthy, 2015 NSCA 56 (CanLII), the deceased executed a formal will with two witnesses but also signed a holograph letter addressed to his daughter. The trust company named as executor in the formal will sought a grant of probate for the will but declined to place the holograph letter before the court for determination of its validity, citing the illiquidity of the estate assets and its reluctance to incur legal costs. The daughter sought to propound the letter herself, opposed by her step-mother who was the residuary beneficiary under the formal will. The daughter succeeded at trial in having the letter accepted as a valid codicil, and this was upheld on appeal. The daughter claimed legal costs out of the estate, to be paid on a solicitor and client basis. Her argument was that she took on the duties of the executor to establish which documents comprised the deceased s testamentary wishes, and if the trust company had done so, it would have been awarded full indemnity. The Court of Appeal agreed and awarded her costs on a solicitor and client basis. The Court stated: [51] In Re Benbow Estate, (1862) 2 Sw. & Tr. 487, 164 E.R. 1086 (Eng. Prob. Ct.), Sir C. Cresswell stated:... it seems strange for the executors to call on any other person to propound testamentary papers. Halsbury s Laws of England, 4th ed., (London: Butterworths, 2000) in vol 17(2) at 271 states: An executor who doubts the validity of a codicil should not cite the persons interested under it to propound it, but should proceed to prove the will in solemn form. Re Muirhead (deceased), [1971] 1 All E.R. 609 reiterated that it was the duty of an executor to execute the last wishes of a testator as expressed in all documents testamentary in nature, and thus to prove the validity of any document in question in solemn form. According to James MacKenzie, Feeney s Canadian Law of Wills, 4th ed, loose-leaf (Markham, ON: LexisNexis Canada Inc., Last Updated: April 2015) at 8.13, the general duties of an executor include application made to the court of probate for the issue of proper grant of administration. There is contrary authority in other jurisdictions, distinguishing between situations in which the executors believe that the document in controversy is clearly not a valid testamentary
5 instrument, as opposed to genuinely uncertain situations where it may or may not be. The recommended route in the former situation is to bring the court s attention to the disputed document and to give notice to all interested parties who may benefit from it or who may be prejudiced by it, leaving the onus on them to contest the issue. In the latter situation, it may be prudent to seek the directions of the court, particularly to guard against an unfavourable award of costs against the personal representative, and to proceed to take an active part in the proceeding if the court authorizes it. See: Re Gibbs Estate, (1959), 29 W.W.R. 78 (Sask. Surr. Ct.); Re Bilton, [1915] 8 O.W.N. 553. The administrator pendente lite is less likely to be drawn into partisan dispute. Indeed, the raison d être of such an appointment is to ensure that the estate assets are preserved and protected while litigation ensues. If that administrator is not the executor named in the will, he, she or it will have no duty to propound the will or any codicil. One can imagine scenarios, however, when litigation issues potentially affect the estate administration itself. The administrator s views may assist the court in reaching its decision. Since the administrator is under the direction of the court, the administrator could seek the court s direction as to whether intervention is necessary or desirable, and its acceptable parameters. Indeed, the administration of the estate itself may raise potentially contentious issues where the administrator will feel reluctant to proceed unilaterally, even if reasonably sure that it is within its authority. In seeking directions, the administrator may well find itself obliged to take a strong position and to oppose other parties. As the appointee of the court, the administrator should have no personal axe to grind, and should be perceived as acting in the best interests of the ultimate beneficiaries. Finally the administrator pendente lite may in some cases have a limited role to play, either as a friend of the court to facilitate the adjudication of the dispute, or on a watching brief. In framing the order appointing the administrator pendente lite, counsel may have the opportunity to anticipate future issues in the litigation and the administration, so as to tailor the order to state explicitly the extent and the limits of his, her or its powers and duties.